Log In | Register
NEW YORK — FedEx Corp., the world's second largest package delivery company, on Friday offered a signal that the global economy is improving, as it raised its first-quarter earnings forecast on better-than-expected international shipments and cost cuts.
Its shares leapt more than 6 percent in Friday trading. The company's performance is seen as a key indicator of overall economic health, but FedEx hesitated to predict when a recovery may ramp up.
"Despite some encouraging signs in the global economy, it is difficult to predict the timing and pace of any economic recovery," Chief Financial Officer Alan B. Graf Jr. said in a statement.
The Memphis, Tenn.-based company said it expects earnings of 58 cents per share for the first quarter ended Aug. 31. That's down 53 percent from a year ago, but well above the company's previous prediction of 30 cents to 45 cents per share.
On average, analysts were looking for a quarterly profit of 44 cents per share.
FedEx said it raised its forecast because of increased international priority packages and "strict cost management." The company has cut salaries, laid off workers and made other cuts in the face of slowing demand.
The company's international priority shipments are delivered between one and three business days. International package shipments can be an indicator of how well economies are moving because they measure consumer and business activity.
"Nobody knew exactly when international packages would pick back up and when sales would improve, and now we're seeing it — at least the beginning of it," Edward Jones analyst Dan Ortwerth said, in an interview with the Associated Press.
Ortwerth said the company's "aggressive and nimble" global strategy will serve it well as global economic conditions improve.
The company also said it expects to earn 65 to 95 cents per share for the second quarter. The company said the forecast reflects a continued modest recovery in the global economy. Analysts currently expect 70 cents per share.
FedEx is still making less money per package in each of its business segments as fuel charges fall and the freight market remains competitive.
The company declined to offer further detail because it is in a quiet period before it reports first-quarter earnings on Sept. 17.
Jim Corridore, an analyst with Standard & Poor's, said the predictions are a positive indicator that the world's economy is on the right track.
"We think today's news shows continued progress in the global economic recovery we have been looking for," Corridore said.
FedEx shares climbed $4.66, or 6.4 percent, to close at $77.32 Friday after rising as high as $78.30 earlier in the session. It is still well below it 52-week high of $96.99.
